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By now, you should know the whole Knight Capital (NYSE:KCG) ordeal. A recent $400 million rescue deal has allowed the company to avoid collapse after last week’s trading glitch. The disaster at Knight sent big-name stocks like General Electric (NYSE:GE) and Best Buy (NYSE:BBY) into a dither and caused a $440 million loss for the firm.

This is old news to investors. But what you may not know is that just before this debacle, Knight was on the sale block for THREE TIMES that rescue amount.

Fox Business Network’s Charlie Gasparino recently aired a report that the Blackstone Group (NYSE:BX) was ready to pay $1.2 billion for Knight Capital before its trading error.

Gasparino reports that Blackstone “conducted extensive due diligence and had been in negotiations for six months with Knight,” and that “Jefferies Group then used Blackstone’s due diligence and earned a $20 million fee for helping to arrange the plan that saved the firm.”

Here’s what Gasparino reported in detail on Monday:

“Blackstone Group was ready to pay $1.2 billion for Knight Capital before its trading error. The private equity firm conducted extensive due diligence and had been in negotiations for six months with Knight. It was nearly a done deal, but they backed out after the erroneous trade. Jefferies Group then used Blackstone’s due diligence and earned a $20 million fee for helping to arrange the plan that saved the firm.”

Needless to say this is a stunning development, and a near tragedy for Blackstone if true. An interesting bit of reporting by the FBN anchor that adds another level of intrigue to the Knight debacle …